Contract between European company and African organisation / Dispute over international tender / Application of Art. 238 of the LOME III Convention of 1984 / Direct effect of Community law, yes / Application of Art. 238 both in the context of the procedure for awarding a contract and its performance, yes / No specific consent to arbitration is required for the application of Art. 238

Basis of the dispute

The dispute relates to a limited invitation to tender procedure launched by the Organisation XAFA (the Defendant) for the supply, installation and setting up of an after-sales and maintenance service for photo voltaic solar equipment in the Sahel countries. LX (the Claimant company) which had submitted a tender to XAFA, considers that it was illegally excluded from the contract award procedure.

Undisputed facts

XAFA is an African organisation under international public law, created by the Ouagadougou Convention of 12 September 1973, linking nine states from the Sahel region (Burkina Faso, Cape Verde Islands, Gambia, Guinea Bissau, Mali, Mauritania, Niger, Senegal and Chad) and having a separate legal personality of its own.

LX is a company [from a European country] whose purpose is to produce and market photovoltaic solar power operating systems.

In 1989, LX was invited to take part in the limited tender procedure for the supply, installation and setting up of an after-sales and maintenance service of photovoltaic solar equipment, a contract divided into three lots financed by the European Communities Development Fund in the context of the Lomé Convention (third ACP-EEC convention) of 8 December 1984.

LX tendered for lots 2 and 3. The envelopes containing the tenders were opened at a public meeting held at DG VIII of the Commission of the European Communities in Brussels. LX's tenders turned out to be the lowest for lots 2 and 3. The time limit for submission of tenders was then extended for a further two months.

By letter dated . . . 1990, XAFA informed LX that it had not been selected for the contracts in question.

By letters of the same date, XAFA informed the other bidders that had not been selected; moreover, it provisionally awarded the contract to . . .

By letter to XAFA dated . . . 1990, LX asserted that its exclusion was illegal and asked XAFA to cancel its decision in order to enable LX to take part in the follow-up procedure until the final award of the contract. It also reserved the right of recourse to arbitration if necessary as provided by article 238 of the aforesaid Lomé Convention. By letter dated . . . 1990, XAFA rejected LX's allegation and request.

By petition dated . . . 1990, LX filed an application for cancellation and an interlocutory request before the Court of Justice of the European Communities, aimed at obtaining a postponement of implementation or any other interim measures appropriate for ensuring LX's readmission to the procedure. This interlocutory request was rejected by order of the President of the Court dated . . . 1990.

Jurisdiction

The Arbitral Tribunal has jurisdiction to rule on its own jurisdiction in accordance with article 8(4) of the ICC Rules of Arbitration (see: Craig, Park & Paulsson, International Chamber of Commerce Arbitration, Oceana, ICC, ed. 1990, § 11.03). This point has not been disputed by the parties.

1. According to the Claimant, the Arbitral Tribunal's jurisdiction is based on article 238 of the third Lomé Convention of 8 December 1984, which came into force on 1 May 1986 (hereinafter called "Lomé III", a convention signed by the European Communities, the EC Member States and the ACP states), on article 24 of the invitation to tender (part B) and on article 5 of the General Specifications (hereinafter "GS"). The fact that neither the Claimant nor the Defendant are parties to Lomé III does not prevent its being invoked since, on the one hand, XAFA is acting in the name and on behalf of those ACP states that are its members and, on the other hand, the Convention gives rise to direct effects in favour of private individuals or entities.

The said grounds of jurisdiction are disputed by the Defendant for a number of reasons. In its view, Lomé III cannot be applied in this case since neither LX nor XAFA are parties to the Convention. Moreover, LX may not invoke the Convention because it does not create rights for private individuals. XAFA for its part is vested with a personality of its own which prevents obligations contracted by its member states from being invoked against it. In addition, the Defendant asserts that it issued no specific consent to arbitration as was required. Lastly, articles 24 of the invitation for tender (part B) and 55 of the General Specifications, in its view, are only applicable to disputes relating to the performance of contracts.

2. The third Lomé Convention-which forms part of the law of the ACP member states (whether or not they are members of XAFA) and of the European Communities and their member states-seems applicable prima facie to the present dispute (the fourth ACP-EEC Convention signed in Lomé on 15 December 1989 came into force on 1 September 1991 (OJEC no. L 229 / 287 of 17.8.91), as did the provisions relating to the implementation of articles 305, 306 and 307 (the said articles and provisions relating to implementation are different, in a number of important aspects, from the rules specified in the context of Lomé III relating to general conditions of contracts and the settlement of disputes)). Heading III of the third part in fact organises financial and technical co-operation between the European Communities and the ACP states, in the context of which the invitation for tender launched by XAFA took place. Article 238 (article 278 for its part organises a system of conciliation and arbitration in the event of disputes between the signatories of Lomé III) of the Convention, whose applicability the parties are disputing, specifies the method for settling any disputes arising in relation to contracts negotiated or concluded in the context of the said co-operation; its first paragraph provides as follows:

any disputes between the administration of an ACP member state and an entrepreneur, supplier or provider of services, whether an applicant or a tenderer, on the occasion of the award procedure or performance of a contract financed by the Fund shall be settled by arbitration in accordance with a set of procedural rules adopted by the council of ministers.

Paragraphs 2 and 3 of the provision specify that the said rules shall be adopted subsequently by decision of the EEC/ACP Council of Ministers and that, as a transitional measure, "any disputes shall be finally settled according to the Rules of Conciliation and Arbitration of the International Chamber of Commerce".

In order to determine whether article 238 of Lomé III offers it an adequate basis for jurisdiction, the Arbitral Tribunal will examine in succession the questions as to whether the said provision may be invoked against XAFA, whether it may be asserted by LX, whether it is applicable to a contract award procedure, and, more generally, the question of the form of consent to an arbitration procedure. After this, the terms of the General Specifications will then be examined.

. . .

The Arbitral Tribunal finds that article 238 is a significant provision in the context of the Lomé Convention, as its aim-which accords with EC policy rules-is that bidders and successful tenderers should have a form of judicial recourse available to them. For a variety of legal, political and practical reasons (cf. generally Chapter 36 of Craig, Park & Paulsson, International Chamber of Commerce Arbitration, 2nd ed. 1990), the parties to Lomé III agreed that the recourse in question would be arbitration. It would seem contradictory that this method of dispute settlement, desired by and applicable to ACP states, should no longer be available when the said states, instead of benefiting directly from financial and technical co-operation, benefit from the intervention-moreover, one expressly provided for by Lomé III-of an inter-state institution grouping certain of these states. Likewise, it would seem paradoxical that arbitral settlement of disputes with the ACP member states-a process whose particular aim is to reassure the legal subjects dealing with such states with regard to dispute-settlement and safeguarding them against possible immunities from jurisdiction-should no longer be available in the event of a dispute with an inter-state institution, enabling in particular the said institution to invoke immunities of this kind (Article 2 of XAFA's constitution is drafted as follows: "The Committee, its assets and its property wherever they are and whoever owns the same, shall have the benefit of immunity from jurisdiction except insofar as the Committee has expressly waived this in a particular case") (the underlining is by the Arbitral Tribunal).

Regarding whether LX may invoke article 238

According to the Defendant, LX may not invoke article 238 of Lomé III against it. This article is contained in an international treaty, linking states to an international organisation, which may not be invoked by legal subjects who are not parties to it by application of the principle of the privity of treaties. The Convention does not create rights on the part of individuals directly, either; such rights may in any case only stem from a transformation of the international rule into a domestic law, but no domestic law may be invoked in the present case.

On the other hand, according to the Claimant, the parties to a treaty may have had the intention to create an instrument which constitutes a source of rights and obligations for individuals. In its view, this is the case of article 238 of Lomé III, the direct effect of which results from the terms themselves.

The rule of privity of treaties is a basic principle of international law. Article 34 of the Vienna Convention on the law of treaties provides that a treaty creates neither obligations nor rights for a third state without its consent. Likewise, treaties, devised for creating legal relationships between subjects of the international legal system, do not generally constitute a source of rights that may be invoked by individuals. This does not prevent their sometimes being able to display such effects. As the Permanent Court of International Justice underlined:

The very object of an international agreement, in the intention of the contacting parties, (may) be the adoption, by the parties, of given rules, creating rights and obligations for individuals and liable to be applied by the national courts.

(PCIJ case of the Jurisdiction of the courts of Danzig, Series B, no. 15, p. 18.)

In such a case, if they are self-executing (that is, if their application does not require any additional domestic measures), such treaties (or certain of their provisions) are directly applicable and "individuals may invoke them before the national courts, even if their terms have not been incorporated in the national legislation" (Nguyen Quoc Dinh, Daillier & Pellet, Droit international public, 3rd ed., Paris, LGDJ, 1987, p. 215. Regarding the criteria enabling it to be determined whether the parties to the treaty had an intention to confer a direct effect on a provision, see Verhoeven, "La notion d''applicabilité directe' du droit international", Rev. belge dr. intern., 1980, p. 243, esp. p. 260 et seq.). They have thus been acknowledged to have a "direct effect" which may be invoked both before the national courts and before an Arbitral Tribunal.

The direct effect attributed to international standards is a noticeable characteristic of Community public policy. The Court of Justice of the European Communities thus decided in 1963 in its ruling in the Van Gend en Loos case, that

Independent of the legislation of the member states, Community law, just as it creates obligations on the part of individuals, is also intended to engender rights which form part of their legal heritage.

(CJEC, 5 Feb. 1963, Recueil, 1963, p. 3.)

The Court then set out the criteria for determining the direct effect of a provision of Community law. A provision is to be recognised as having such an effect:

if it makes member states responsible for specific, unconditional obligations that are not subject, in their performance, to measures which would leave the member states with a choice between several solutions.

(Groux, "L'invocabilité en justice des accords liant la CEE", RTDE, 1983, p. 213.)

Subsequently, the Court has gradually extended the direct effect of Community law in the strict sense of the term to international agreements concluded by the European Communities (See on the development of this case law Louis, L'ordre juridique communautaire, 5th ed. 1990, pp. 126-129; Le droit de la CEE, vol. 12, "Relations extérieures", by Louis Bruckner (1980), pp. 188-191.). According to the Court, "the provisions of such agreements produce effects of this kind without the intervention of any subsequent act"; to reach this conclusion, the Court refers to the "spirit", to the "context", to the "background" and to the "terms" of the provisions in question. By application of these principles, the Court has recognised that certain provisions of the Yaoundé I (1963) and II (1969) Conventions, which governed relationships between the European Communities and associated states before the Lomé Conventions came into force have direct effects (CJEC, Bresciani case, Recueil, 1976, p. 129.). Hence there is no objection in principle to an individual invoking the provisions of the Lomé Conventions. However, for it to be recognised as having a direct effect, it is necessary that the provision invoked should display the characteristics described by the Court.

. . .

If one considers the background and the terms of article 238, it thus appears that the aim of this provision was indeed to organise the settlement of disputes between an administration of an ACP state (or of a group of states: cf. no. 3 above) and individuals on an exclusive basis. Accordingly it is logical and necessary that it should be possible for the latter to invoke it against the former and vice versa. In the present case, LX can similarly invoke the dispute settlement method laid down by article 238 of Lomé III against XAFA (supra, no. 3).

Applicability of article 238 to a contract award procedure

There is no doubt that the field of application of article 238 of Lomé III concerns both disputes arising in the context of the procedure for awarding a contract and those arising in the context of the performance of a contract. Thus it is evident from its actual terms:

any disputes between the administration of an ACP member state and an undertaking, a supplier or provider of services whether an applicant or a tenderer, on the occasion of a procedure for the award or performance of a contract financed by the Fund shall be settled by way of arbitration . . .

(Underlined by the Arbitral Tribunal. See also in this sense the Brown, Spedding and Van Houtte studies cited above.)

. . .

Consent to arbitration

The Defendant puts forward his lack of specific consent to the arbitration procedure.

. . .

The Arbitral Tribunal is of the opinion that article 238 of Lomé III sanctions the agreement of ACP states (and groups of such states) to submit disputes that arise subsequently between themselves and individuals in the context of the award of contracts financed by the EDF to arbitration (See the opinion of Professor Van Houtte whereby "by submitting a tender for a contract covered by these general conditions [incorporating article 132 of Lomé II], a tenderer implicitly agrees to arbitration for settlement of disputes relating to the tenders and the award" (op. cit., CMLR, 1982, p. 594); see also Brown and Spedding studies cited above). Article 238 is in fact formulated unconditionally ("any disputes . . . shall be settled by way of arbitration . . ."), which contrasts with the drafting of the arbitration clauses contained in many international acts and which are not aimed at introducing an obligation but solely a possibility of recourse to arbitration procedure.

As regards the requirement of a specific agreement referred to above, this cannot apply in the present case in that its aim is to specify "the conditions under which the dispute is to be submitted to arbitration". Such details would be unnecessary since paragraph 3 of article 238 provides for the Rules of Conciliation and Arbitration of the International Chamber of Commerce to apply to the arbitration.

The fact that article 238 of Lomé III sanctions the consent of the ACP states to having any dispute to which they might be parties in the context of the award and performance of contracts funded by the EDF submitted to arbitration is confirmed by the attitude of one of the main parties involved in the contract award procedure: the Commission of the European Communities. On a number of occasions, tenderers have brought claims against that institution before the CJEC on the grounds that they had been unjustly disregarded in the award of EDF-funded contracts, in that the Commission exercises control over the Fund's financial regularity. While denying that acts it has carried out in this context could be criticised by the tenderers excluded on the ground of article 173 of the Treaty of Rome, the Commission has consistently stated before the Court that

disputes relating to such an award, which of necessity involve tenderers to the ACP state, must . . . be resolved by arbitration, in accordance with article 132 § 1 of the convention [Lomé II], which also applies to disputes between the ACP state and a tenderer to whom the contract was not awarded.

(CJEC, CMC (Muratori) Judgement of 10 July 1985, p. 2344, § 26. See also the judgement of 25 October 1990 cited above.)

In conclusion, the Arbitral Tribunal considers that the consent of the ACP states (or groups of states) to the arbitral settlement of any disputes arising between themselves and tenderers or successful bidders for contracts funded by the EDF was expressed by the said states at the time of their ratification of the Lomé III Convention and that this consent constitutes an adequate contractual basis so far as they are concerned and, by association (supra, no. 3), so far as XAFA itself is concerned.

The General Specifications

XAFA's invitation to tender, in its preliminary remarks, is stated as follows:

Parts A and B together, the technical appendix and the general specifications for public works and supply contracts financed by the European Development Fund (OJEC No. L/39 of 14 February 1972, . . .) constitute the set of clauses and provisions relating to the drawing up of offers, the placing of orders and the performance of orders subsequent to the said invitation to tender.

(Underlined by the Arbitral Tribunal.)

The said General Specifications form part of the law applicable to the present dispute (Infra, B, Nos 10 and 11.). It was established by the decision no. 42/71 of 30 November 1971 taken by the Association Council under the terms of the Yaoundé II Convention (1969), especially article 16 of protocol no. 6; it was rendered applicable by a regulation dated 31 January 1972 passed by the Council of the European Communities, "obligatory in all its aspects and directly applicable in every member state"; the associated member states and the member states were also bound, for their part, to pass the measures relating to the implementation of the aforesaid decision of the Association Council prior to 31 March 1972 (OJEC, L/39/1 and 2 of 14 February 1972). Lastly, in application of article 237.2 of Lomé III, the General Specifications of 1971 were still in force as a transitional measure at the time of the invitation for tender in dispute.

According to article 55.1, first paragraph of the General Specifications:

Any dispute arising, either between the administration and a tenderer on the occasion of the contract award procedure, or between the administration and the person awarded the contract, and resulting from the interpretation or performance of a contract, shall be settled by way of arbitration, in accordance with the Rules of arbitration decided by the Association Council.

(Underlined by the Arbitral Tribunal.)

. . .

Article 55 extends and confirms the consent given by the ACP states (or groups of states)-which consent, as we have seen, binds the XAFA by association-in article 238 of Lomé III, to the settlement by arbitration of disputes between such states and tenderers or successful bidders for contracts funded by the EDF; included in the invitation for tender dossier prepared and used by XAFA, article 55 also makes this consent specifically applicable to the invitation for tender in dispute, on the direct initiative of XAFA itself.

This consent to arbitration exists despite the fact that no contract was concluded between the Defendant and the unsuccessful tenderer, as the Defendant rightly underlined; analysis of the file admits of no other conclusion. Moreover, this is reinforced, were it necessary, by the doctrine of the autonomy of the arbitration clause and article 8(4) of the ICC Rules of Arbitration. LX's consent for its part-which is not disputed-is expressed first of all by its participation in a tender procedure containing an arbitration clause and secondly by its Request for arbitration dated 4 December 1990. The application of the general principle of good faith in the behaviour of the two parties strengthens these observations.

Hence, with regard to arbitration, there was indeed an expression of the intent of the two parties to the present case, an expression of intent (i) adequate in the light of the law of arbitration in general, (ii) taking account of the legal policy of the European Communities and extended into the organisation of their relations with the ACP states, (iii) complying, in this particular context, with article 8(4) of the ICC Arbitration Rules. This conclusion can be perfectly reconciled with the regulatory nature of the General Specifications, in the relationship between the awarding authority and an unsuccessful tenderer.

. . .

Conclusion on the question of jurisdiction

The Arbitral Tribunal considers it has jurisdiction to examine the present dispute, both on the combined basis of article 238 of the third Lomé Convention, article 55 of the General Specifications of 1971 and the Rules of Arbitration of the International Chamber of Commerce and on the basis of article 55 of the GS alone and the Rules of Arbitration cited above.

In addition, this conclusion on the question of jurisdiction-in a situation which does not exclusively depend on traditional arbitration nor exclusively on rules of public international law-at one and the same time complies with the legal system applicable to the ACP/EEC Conventions (Cf. also Maganza's authoritative work, Le droit de la Communauté économique européenne, vol. 13, ed. Univ. Brussels, 1990, esp. no. 339: "It is interesting to note that, contrary to international practice in this field, the convention extends the domain of application of arbitration beyond disputes relating to the tender procedure, in which the entrepreneur, the supplier or the service provider are only "tenderers". This extension of opportunities for recourse to arbitration procedure (which moreover was already specified by previous ACP/EEC conventions) might, in practice, enable the tenderer whose offer has not been accepted to resort to arbitration against the ACP national administration") and the requirement of consent appropriate to any contractual arbitration. In the latter respect, each of the parties has in fact expressed the required intention.

This conclusion regarding jurisdiction also accords with equity and even simple good sense, especially in that the latter does not seem compatible with an artificial construction whereby the ACP states, when benefiting from EC funding through a regional or inter-state body rather than benefiting from it directly, would escape certain standards (rights or obligations) forming an inseparable whole with the funding in question.

Lastly, this conclusion as to jurisdiction accords both with Community public policy rules and with their extensions into the terms of the Lomé III association, which rules in principle exclude the possibility of a tenderer or successful bidder finding itself deprived of any right of recourse to dispute settlement.'